MONEY LAUNDERING - HSBC

is the process of concealing the
source of money obtained by illicit means. The methods by which money may be
laundered are varied and can range in sophistication. Many regulatory and governmental
authorities quote estimates each year for the amount of money laundered, either
worldwide or within their national economy. In 1996, the International Monetary Fund estimated
that two to five percent of the worldwide global economy involved laundered
money. However, the Financial Action Task
Force on Money Laundering (FATF), an intergovernmental body set up to
combat money laundering, stated that "overall it is absolutely impossible
to produce a reliable estimate of the amount of money laundered and therefore
the FATF does not publish any figures in this regard". Academic
commentators have likewise been unable to estimate the volume of money with any
degree of assurance.

Regardless of the difficulty in measurement, the amount of
money laundered each year is in the billions (US dollars) and poses a
significant policy concern for governments. As
a result, governments and international bodies have undertaken efforts to
deter, prevent and apprehend money launderers. Financial institutions have
likewise undertaken efforts to prevent and detect transactions involving dirty
money, both as a result of government requirements and to avoid the
reputational risk involved.

Methods

Money laundering often occurs in three steps: first, cash is
introduced into the financial system by some means ("placement"); the
second involves carrying out complex financial transactions in order to
camouflage the illegal source ("layering"); and, the final step
entails acquiring wealth generated from the transactions of the illicit funds ("integration").
Some of these steps may be omitted, depending on the circumstances; for
example, non-cash proceeds that are already in the financial system would have
no need for placement.

Money laundering takes several different forms, although
most methods can be categorized into one of a few types. These include
"bank methods, smurfing [also known as structuring], currency exchanges,
and double-invoicing".

Structuring: Often known as "smurfing", is a
method of placement by which cash is broken into smaller deposits of money,
used to defeat suspicion of money laundering and to avoid anti-money laundering
reporting requirements. A sub-component of this is to use smaller amounts of
cash to purchase bearer instruments, such as money orders, and then ultimately
deposit those, again in small amounts.

Bulk cash smuggling: Physically smuggling cash to another
jurisdiction, where it will be deposited in a financial institution, such as an offshore bank, with greater bank secrecy or less rigorous money laundering
enforcement.

Cash-intensive businesses: A business typically involved in
receiving cash will use its accounts to deposit both legitimate and criminally
derived cash, claiming all of it as legitimate earnings. Best suited is a
service business. As such business has no variable costs, it is hard to detect
revenues-costs discrepancies. Examples are parking buildings, strip clubs, tanning
beds or a casino.

Trade-based laundering: Under- or over-valuing invoices in
order to disguise the movement of money.

Shell companies and trusts: Trusts and shell companies
disguise the true owner of money. Trusts and corporate vehicles, depending on
the jurisdiction, need not disclose their true, beneficial, owner.

Bank capture: Money launderers or criminals buy a
controlling interest in a bank, preferably in a jurisdiction with weak money
laundering controls, and then move money through the bank without scrutiny.

Casinos: An individual will walk into a casino with cash and
buy chips, play for a while and then cash in his or her chips, for which he or
she will be issued a check. The money launderer will then be able to deposit
the check into his or her bank account, and claim it as gambling winnings.

Real estate: Real estate may be purchased with illegal
proceeds, then sold. The proceeds from the sale appear to outsiders to be
legitimate income. Alternatively, the price of the property is manipulated; the
seller will agree to a contract that under-represents the value of the
property, and will receive criminal proceeds to make up the difference.

Black salaries: Companies might have unregistered employees
without a written contract who are given cash salaries. Black cash might be
used to pay them.

Fictional loans

Criminal sanctions

Money laundering has been criminalized in the United States
since the Money Laundering Control Act of
1986. That legislation, contained at section 1956 of Title 18 of the United
States Code, prohibits individuals from engaging in a financial transaction
with proceeds that were generated from certain specific crimes, known as
"specified unlawful activities" (SUAs). Additionally, the law
requires that an individual specifically intend in making the transaction to
conceal the source, ownership or control of the funds. There is no minimum
threshold of money, nor is there the requirement that the transaction succeed
in actually disguising the money. Moreover, a "financial transaction"
has been broadly defined, and need not involve a financial institution, or even
a business. Merely passing money from one person to another, so long as it is
done with the intent to disguise the source, ownership, location or control of
the money, has been deemed a financial transaction under the law. However, the
lone possession of money without either a financial transaction or an intent to
conceal is not a crime in the United States.

In addition to money laundering, the law, contained in
section 1957 of Title 18 of the United States Code, prohibits spending in
excess of US$10,000 derived from an SUA, regardless of whether the individual
wishes to disguise it. This carries a lesser penalty than money laundering, and
unlike the money laundering statute, requires that the money pass through a
financial institution.

According to the records compiled by the United States
Sentencing Commission, in 2009, the United States Department of Justice
typically convicted a little over 81,000 people; of this, approximately 800 are
convicted of money laundering as the primary or most serious charge. READ MORE : HERE

April 30, 2013

Flashback: NBC Report

CONFIRMS BANKERS REALLY DO FUND DRUG
CARTELS & TERRORISM

Anthony Gucciardi

Infowars.com

Still think it’s a ‘conspiracy theory’ that the largest mega
banks are profiting off of the drug trade, or even the activity of terror
groups? A little-known NBC report from 2012 actually confirms it.

In fact, one 2012 NBC report details how HSBC bank helped to
finance everything from Mexican drug cartels to Syrian terror cells. Thanks to
a United States Senate report, which centers around the role of Mexican
drug cartel funds travelling through HSBC, NBC and a few other outlets actually
covered the breaking news — albeit to a small degree.

And it’s this report that reveals how the United States
branch of HSBC directly aided backers of Al-Qaeda and Mexican drug cartels through
both finances and overall banking services. From terror-linked groups out of
Saudi Arabia and Bangladesh, HSBC was tied up with numerous terror groups andfinancially
empowering them for quite some time.

For around a decade or more, in fact.

Yet HSBC has managed to get away without much of a hitch.
Even the 2012 Senate Report we’re discussing was simply a ‘probe’ that
documents the events themselves. Even the major United States bank regulatory
group the Office of the Comptroller of the Currency was deemed to have
improperly looked into the situation — instead turning a blind eye to the
entire operation. The investigative group at the Senate even reports on how the
very culture of HSBC has been ‘polluted’ during the lengthy time period of
terror and drug funding:

“The culture at HSBC was pervasively polluted for a long
time,” said Senator Carl
Levin.

MULTIPLE MEGA BANKS CAUGHT FUNDING DRUG CARTELS, TERROR
GROUPS

But HSBC isn’t the only bank associated with the Mexican
drug trade or the financial support of known terror groups. While HSBC was
funding Iran and Mexican drug cartels according to the report, Wachovia was
also getting in on the Mexican drug trade financial game. It was actually back
in 2010 when Wachovia forfeited $160 million (chump change to them) in order to
settle a Justice Department probe into their financial support of Mexican drug
cartels. This was all broken down by the Guardian in an article entitled “How a big US
bank laundered billions from Mexico’s murderous drug gangs.”

ING also decided to
get in on the action, however, and ultimately settled a bit higher at $619
million after violating US sanctions against Iran and Cuba in shadowy financial
trades.

So what is to be done to these banks at the end of the day?
Are executives being jailed, companies being dissolved, and funds being
withdrawn from Mexican drug cartels and terror groups? Well, no. Instead,taxpayers
are helping to fund the megabanks with $83 billion per year – far more than any minor
settlements paid out by the banks.

“HSBC would almost certainly have lost its banking license
in the U.S., the future of the institution would have been under threat and the
entire banking system would have been destabilized.”

People were rightfully outraged when not a single HSBC
banker went to jail for a decades’ worth of federal crimes, including
money-laundering linked to drug cartels, terrorists and oppressive regimes.

Taibbi dove deep into HSBC’s case and history, revealing
that the bank’s crimes were even worst than we thought. Here are five shockers
from his article:

1. By HSBC’s December settlement, the bank had already
received two cease-and-desist letters.

First, in 2003, the Federal Reserve sent a cease-and-desist
letter to HSBC demanding the bank take strict precaution not to do business
with criminals and terrorists. The letter came after revelations that HSBC had
opened accounts for shady characters like Sulaiman bin Abdul Aziz Al Rajhi, one
of the “20 early financiers of Al Qaeda.”

Essentially, the Feds caught HSBC engaged in criminal
activity and told the bank to stop. But they didn’t. After the first
cease-and-desist letter, the bank received dozens of warnings from the OCC,
which they continued to ignore.

The second cease-and-desist order came in 2010, after the
OCC determined HSBC’s money-laundering controls to be weak. Instead of
prosecuting the bank after it had ignored countless warnings, the OCC gave HSBC
a second chance.

Taibbi compares the leniency given to HSBC compared to
victims of the outrageous “three-strikes” rule: “Three-time losers doing life
in California prisons for street felonies might be surprised to learn that the
no-jail settlement Lanny Breuer worked out for HSBC was already the bank’s
third strike.”

Taibbi reports that HSBC used a technique called “stripping”
to avoid detection when they did business with countries under U.S. sanction.
In particular, HSBC sought to increase its profits by laundering cash for Iran.
The author quotes a memo from HSBC’s Middle East subsidiary, HBME:

“It is anticipated that Iran will become a source of
increasing income for the group going forward,” the memo says, “and if we are
to achieve this goal we must adopt a positive stance when encountering
difficulties.”

To do this, the “bank would remove references to Iran in
wire transactions to and from the United States, often putting themselves in
place of the actual client name to avoid triggering OFAC alerts,” explains
Taibbi.

Taibbi further reports that there is evidence linking HSBC
to a slew of other sanctioned countries like, Sudan, Cuba, Burma and North
Korea. HERE

In what Taibbi calls the “pinnacle innovation in the history
of sleazy banking practices,” HSBC created a so-called “Cayman islands” branch
in Mexico that let customers sidestep routine screening when opening accounts.
The writer says clients “barely had to submit a real name and address, much
less explain the legitimate origins of their deposits.” A 2002 audit revealed
that 41 percent of accounts didn’t have complete client information.

When it turned out that American companies used these
accounts to sell aircraft to drug cartels, HSBC Mexico finally shutout some of
the “Cayman islands branch” clients—but not all of them. Taibbi notes that, “As
late as 2012, when HSBC executives were being dragged before the U.S. Senate,
the bank still had 20,000 such accounts worth some $670 million.”

A part of a major narcotics investigation, federal agents
discovered a ton of evidence that implicated HSBC in widespread money
laundering. For example, Taibbi reports the bank “played a key role in the
so-called Black Market Peso Exchange, which allowed drug cartels in

both Mexico and Colombia to convert U.S. dollars from drug
sales into pesos to be used back home.” And the dealers HSBC did business with
were some of the most violent in the world.

Former federal prosecutor Neil Barofsky told Rolling
Stone HSBC worked for Colombia's Norte del Valle and Mexico's Sinaloa
cartels — “groups that don't just commit murder on a mass scale but are known
for beheadings, torture videos and other atrocities, none of which happens
without money launderers.”

Barofsky says he once put a Notre del Valle cartel member
behind bars for 10 years on money laundering charges far smaller than what HSBC
was involved with.

After the OCC sent HSBC its second cease-and-desist letter,
the bank hired a bunch of unqualified workers to “investigate” suspicious
alerts. In reality, the Delaware-based department was tasked with clearing out
skeletons from HSBC’s closet. Taibbi quotes damning emails from HSBC bosses
pressuring workers to clear as many alerts as possible, and praising the entire
Delaware office when it erased 60 suspicious transactions in a week.

Taibbi interviewed one of these “investigators,” Everett
Stern, who described laughably low criteria for clearing an alert.

"Basically, if a company had a website, you could clear
them," he told Rolling Stone.

Stern found a slew of suspicious transactions that he was
hired to scrub away, including exchanges tied to Hezbollah, Iran and the Muslim
Brotherhood. He decided to turn whistleblower and alert the FBI.